Former Qwest Communications International Inc. chief Joseph Nacchio won a $14.2 million insurance case verdict against a Goldman Sachs Group Inc. unit and a financial adviser who previously helped convict him of insider trading, according to a lawyer who filed the lawsuit.
Nacchio, 66, was serving a federal prison term for insider trading in 2010 when he and his wife, Anne Esker, sued an adviser at Ayco Co., a firm that Goldman Sachs owns. They claimed they paid a $4.5 million premium in 2000 for variable life insurance policies that they believed had a death benefit of $94.8 million, according to papers in state court in Morristown, New Jersey.
The Nacchios canceled that coverage in 2010 when they learned that financial advisor David Weinstein “did not understand the life insurance policies he was selling,” according to court papers. Instead, they faced the possibility that the policies could lapse long before they expected. They paid $27 million for new coverage, which they claimed was $14 million more than should have paid in 2000 for the same coverage they thought they were buying.
Jurors deliberated 75 minutes before ruling Thursday in favor of the Nacchios, according to their attorneys, Bruce H. Nagel and Greg M. Kohn. The judge told the jury during the monthlong trial that Goldman Sachs and Ayco would be responsible for any verdict, according to Kohn. Goldman Sachs bought Ayco in 2003.
“I am extremely pleased that the jury found a division of Goldman Sachs liable and awarded this amount of damages,” Nagel said in an interview.
In a Sept. 25 motion to dismiss the case, Ayco attorneys said the key risk of the policies was that their investment returns were subject to market forces and might not support the death benefit. The Nacchios also risked having to pay additional premiums, or the policies could lapse, according to the filing.
“This risk was fully disclosed to plaintiffs by Weinstein, Ayco and plaintiffs’ own estate planning attorney,” according to the filing.
“We are disappointed in the verdict and we plan to appeal, ” said Ayco spokesman Brian Cuneo.
Nacchio, the former chairman and chief executive officer of Denver-based Qwest, was found guilty in 2007 of insider trading for illegally selling $52 million of stock. He was sentenced to almost six years in prison. He was fined $19 million and agreed to forfeit $44.6 million. Qwest is now part of CenturyLink Inc.
Weinstein, called as a witness by prosecutors to show Nacchio had a motivation to sell Qwest shares before the stock price plunged, testified at the criminal trial about the ex- CEO’s personal finances and transactions.
The case is Nacchio v. Weinstein, L-3298-10, Superior Court of New Jersey, Morris County (Morristown).